Bailing out of BT. but what to buy?...

[floyd3592]

Thinking of divesting my holding of BT in my HYP following it’s suspension of divis for the foreseeable & I’m also I’m not confident about its long term ability to recover its share price from it’s current slump. I’m currently sitting on a 48% capital loss and thought I could be better, rather than ‘locking in’ my losses, by purchasing some more of the other shares in my HYP with similar losses but with better dividend paying and overall prospects than BT.

I am currently sitting on losses of 50% for RDSB, 43% for IMB, 47% for HSBC & 27% for Aviva. Would any of these make a better home for my money than BT? Or are there any other candidates who’s share price has dropped lately but might be a better home for my dosh?

[idpickering]

Thinking of divesting my holding of BT in my HYP following it’s suspension of divis for the foreseeable & I’m also I’m not confident about its long term ability to recover its share price from it’s current slump. I’m currently sitting on a 48% capital loss and thought I could be better, rather than ‘locking in’ my losses, by purchasing some more of the other shares in my HYP with similar losses but with better dividend paying and overall prospects than BT.

I am currently sitting on losses of 50% for RDSB, 43% for IMB, 47% for HSBC & 27% for Aviva. Would any of these make a better home for my money than BT? Or are there any other candidates who’s share price has dropped lately but might be a better home for my dosh?

Morning. It is nice to see a new post on this board, after 48 hours with nothing. I was waiting for the tumbleweed to appear. Back to your dilemma, I feel your pain regarding the capital losses. I get that capital values are immaterial in HYPland, but we're only human after all, and these paper losses are uncomfortable to look at when checking your HYP. For peace of mind, which I think is important too, over the recent past I did some draconian sorting out of my HYP. I dropped BT.A, HSBC, LLOY, BLAND, LAND and WPP. Replacing them we have PHP, SDRC, PHNX, IGG, and SBRY. There have been top ups too, with RDSB, BP., GSK, PHP, LGEN and PHNX all getting the nod. I've meddled far to much over recent months, and now only have 25 holdings, all of which I'm happy to sit on. My HYP was discussed in this thread recently; viewtopic.php?p=318258#p318258

Ian.

[idpickering]

Morning. It is nice to see a new post on this board, after 48 hours with nothing. I was waiting for the tumbleweed to appear. Back to your dilemma, I feel your pain regarding the capital losses. I get that capital values are immaterial in HYPland, but we're only human after all, and these paper losses are uncomfortable to look at when checking your HYP. For peace of mind, which I think is important too, over the recent past I did some draconian sorting out of my HYP. I dropped BT.A, HSBC, LLOY, BLAND, LAND and WPP. Replacing them we have PHP, SDRC, PHNX, IGG, and SBRY. There have been top ups too, with RDSB, BP., GSK, PHP, LGEN and PHNX all getting the nod. I've meddled far to much over recent months, and now only have 25 holdings, all of which I'm happy to sit on. My HYP was discussed in this thread recently; viewtopic.php?p=318258#p318258

Ian.

Sorry, further to my last ( I ran out of time to edit my post), I also brought SSE on board my HYP too, topping that up last week, with a further small top up of my SSE holdings scheduled for next month too. I'm concentrating on stocks that are still paying their dividends, but tbh, I'm likely to buy more TW., and BA. too.The bottom line though, is that meddling with ones HYP is not very HYP, and is something I intend to stop doing going forward.

Ian.

[GoSeigen]

This is not even remotely HYP. The whole point of HYP is that you never sell. If a share does badly, forget it and reinvest the dividends into other shares with steady and growing dividends. Even TJH -- who as we all know does a little mechanical top-slicing -- constantly emphasises the value of dividends growing with inflation.

Moderator Message:
This poster has got the wrong end of the stick. Of course you can sell shares if they no longer pay dividends. I did it myself in 2009 when it looked like being a long time before they might resume dividend payments.

Ignore his comments.

TJH

[Dod101]

Let's ignore GS's comment. I take a simple question and will try to give you a simple answer

BT seems to me to be a good share to get out of, given its prospects but what to buy is the question? I would back IDP that financials are probably the way to go and if you do not hold, or simply would be happy to top up I would plump for Legal & General. I would not go for Imperial Brands, because it is yesterday's share nor HSBC because I cannot see where banks are going and its future is even more clouded because of the China situation. An alternative to L & G might be Primary Health Properties although the yield is relatively modest. I hold all of the shares mentioned, except for BT.

Dod

[idpickering]

Let's ignore GS's comment. I take a simple question and will try to give you a simple answer

BT seems to me to be a good share to get out of, given its prospects but what to buy is the question? I would back IDP that financials are probably the way to go and if you do not hold, or simply would be happy to top up I would plump for Legal & General. I would not go for Imperial Brands, because it is yesterday's share nor HSBC because I cannot see where banks are going and its future is even more clouded because of the China situation. An alternative to L & G might be Primary Health Properties although the yield is relatively modest. I hold all of the shares mentioned, except for BT.

Dod

I agree with your post, and thanks for your kind comment. If I may say though, I get what GS is saying, hence my own comments about how HYPing should be, but we're only human. I'm not an expert, and don't profess to be so either. Enough of that. Regarding the banks that have been mentioned in this thread, I'm not saying never, but it would take a large dose of clarity regarding them and their future before I'd toy with buying them again. As for BT.A, I'm in no rush to consider them as an option to buy either.

Ian.

[Arborbridge]

This is not even remotely HYP. The whole point of HYP is that you never sell. If a share does badly, forget it and reinvest the dividends into other shares with steady and growing dividends. Even TJH -- who as we all know does a little mechanical top-slicing -- constantly emphasises the value of dividends growing with inflation.

If someone had thought BT. was a great buy with a good divi record at Xp why on earth are they selling at 0.5Xp? It just makes no sense. Hold on and focus on something new.

I think this is a good time for pyad to come along and suggest what's good to buy in the FTSE...

GS

The truth is, that you need a strong stomach to stick rigidly with HYP in its purest - or even "pure" - sense. Most people cannot do it unless they are by nature quite happy not to look at their investments except once in a blue moon.
The answer to your question about BT, might be the other retort: "If the facts changes, dear boy, what do you do" or alternatively, "if you realise BT wasn't the company you thought it was, look at it again". Being half price does not necessarily mean it is a better bargain. We've had a decade of changes and promises at BT, and the story does not seem to improve, so I can empathise with twitchy fingers.

BTW, I'm still holding BT for the moment: maybe I just have stronger stomach - but in reality I am only doing does whilst the price holds near this level. I've set a stop-loss and I'm prepared to let the market make my decision for me - a somewhat cowardly way out!

Since the C-19 crisis, I've so far only sold one share - Informa - which was low yield, then cancelled the dividend. In the past year, I've sold Morrisons to reduce supermarkets and had Green King taken over ( a lucky escape in view of lockdown) - that's all folks.

As for what to buy instead, I think Dod's suggestions are worth listening to.

Arb.

[csearle]

I did some draconian sorting out of my HYP. I dropped BT.A, HSBC, LLOY, BLAND, LAND and WPP. Replacing them we have PHP, SDRC, PHNX, IGG, and SBRY.

Normally I'd not even contemplate draconian sorting out of my HYP because, as GS suggests, it is definitely defined to be LTBH. But this time I think one could be forgiven for at least contemplating it.

Although a share's dividend history is a significant safety factor when buying, for many it is also a trigger to contemplate whether the money could be better invested in other HYP-qualifying shares, in particular if the dividend cut reduces the dividend yield to a very low value, and in particular if the cut seems permanent or at least without a clear temporary underlying cause.

So 14 out of 24 of my HYP consituents have cut dividends (they say) because of this bloody virus. So I contemplated. The result of that contemplation for me is that I see this as a well-caused temporary blip. So although I will not be re-investing in cutters for the time being, I intend to keep them, give them a chance to recover from this cold, and perhaps be somewhat forgiving of their cuts (as a safety factor for buying) if they get back on track dividendwise in the fullness of time.

Chris

[Dod101]

Regarding what to buy, agree with Dod about financials, and have been buying banks, SLA and AV.; whether they are strictly HYP material may need discussion. The banks are solid as rocks now IMV. They have been forced to defer their dividends: that is not their boards' decision based on inability to pay, and the fact they are so closely reigned in is profoundly bullish IMO.

GS

You may agree with me about financials but I do not think too much about your choices in financials. Fund managers have problems, active fund managers especially because of the rise in popularity in passives. That at least partly explains SLA's not doing very much. Furthermore they have just lost a big mandate from Lloyds (Scottish Widows) to Schroders. Aviva is a perennial 'tomorrow' share, currently undergoing a not very far reaching strategic review. I do not think banks security has ever been in much doubt recently anyway; it is what they are going to do or be permitted to do with that security that matters. They may well reinstate their dividends in due course but where do they go from there?

That is why I said Legal & General. They had very good results for 2019 and paid a good final dividend, although no share is fireproof or in this case corona proof. We will see when they announce their half year results to 30 June how they are doing.

PHP has a more modest dividend, some would say all the better for that. It is a REIT with a very steady income. Its price has been driven up presumably because of the perceived security of its income but it has done well for me over the last few years.

Dod

[GoSeigen]

Regarding what to buy, agree with Dod about financials, and have been buying banks, SLA and AV.; whether they are strictly HYP material may need discussion. The banks are solid as rocks now IMV. They have been forced to defer their dividends: that is not their boards' decision based on inability to pay, and the fact they are so closely reigned in is profoundly bullish IMO.

GS

You may agree with me about financials but I do not think too much about your choices in financials. Fund managers have problems, active fund managers especially because of the rise in popularity in passives. That at least partly explains SLA's not doing very much. Furthermore they have just lost a big mandate from Lloyds (Scottish Widows) to Schroders. Aviva is a perennial 'tomorrow' share, currently undergoing a not very far reaching strategic review. I do not think banks security has ever been in much doubt recently anyway; it is what they are going to do or be permitted to do with that security that matters. They may well reinstate their dividends in due course but where do they go from there?

I'm not going to defend my choice of AV. or SLA. Not very much effort went into selecting them beyond yield and the sector and my rough assessment of their valuation. I call it strategic ignorance I'd consider popularity of passives bullish though.

You've expressed this lack of clarity about banks' business before. Banks do a few of simple things. First, they intermediate duration risk: this means they offer long-term loans (which expose them to default and inflation risk) and finance them with short-term borrowing (which exposes them to liquidity and interest rate risk) from their depositors. Second, and linked to the first, they make money off the spread between their lending and borrowing. Third, they charge fees on their services. I see all three as growth areas:
1. Balance sheets have shrunk for years and been derisked. I see that as reversing at some point. Liquidity is not a problem (been there done that) interest rates are already cratered, defaults unlikely (been there done that). Inflation is low now but may rise so one to watch -- e.g. make ssure lending is not all at fixed rates.
2. NIM has been painfully low but at some point will revert to more profitable values.
3. Low interest rates present an opportunity to raise fees on current accounts effectively creating negative rates on their borrowing: that is what I anticipate in coming years. In the country where I live you are charged 2% or more to put cash in the bank. May happen in the UK too. I've no doubt the banks can find other creative ways to generate fees.

That is why I said Legal & General. They had very good results for 2019 and paid a good final dividend, although no share is fireproof or in this case corona proof. We will see when they announce their half year results to 30 June how they are doing.

PHP has a more modest dividend, some would say all the better for that. It is a REIT with a very steady income. Its price has been driven up presumably because of the perceived security of its income but it has done well for me over the last few years.

Haven't looked at PHP. Good dividend cover would be a plus; I've avoided REITs because I don't like property, but will check it out.
[EDIT: Okay looked at PHP. Market cap £2bn, balance sheet £2bn. Can't see how you'd make a profit from this one. Wouldn't touch with a barge pole. What am I missing? Might be a feature of the REIT structure?]

GS

[Dod101]

Ironically I open my copy of The Times this morning and believe it or not they have a buy tip on BT, but 'be prepered for a bumpy ride'!

Dod

[CryptoPlankton]

I'm not going to defend my choice of AV. or SLA. Not very much effort went into selecting them beyond yield and the sector and my rough assessment of their valuation. I call it strategic ignorance

Not to be confused with how the expression is understood in the HYP world, then?

[Dod101]

GS

Yes I appreciate what banks do or are supposed to do but the UK has only one half decent domestic bank, Lloyds, and as it is almost wholly exposed to the UK economy I am not very keen on it and then HSBC which should have everything going for it, very well capitalised, great exposure to fast growing eastern markets, depth in management and so on and yet they have spent the last decade sorting out their problems and are still in the midst of yet another shake up. Then along came the PRA..........

I have seriously gone off banks. That is not to say that there not good investments in them but I have not found any yet.

Dod

[seagles]

Thinking of divesting my holding of BT in my HYP following it’s suspension of divis for the foreseeable & I’m also I’m not confident about its long term ability to recover its share price from it’s current slump. I’m currently sitting on a 48% capital loss and thought I could be better, rather than ‘locking in’ my losses, by purchasing some more of the other shares in my HYP with similar losses but with better dividend paying and overall prospects than BT.

I am currently sitting on losses of 50% for RDSB, 43% for IMB, 47% for HSBC & 27% for Aviva. Would any of these make a better home for my money than BT? Or are there any other candidates who’s share price has dropped lately but might be a better home for my dosh?

My own position is to not do anything with my cutters until the dust settles and we see who does reinstate divis and at what level. Nowhere in HYP does it say you have to keep dividend cutters especially if there are better prospects out there.

Mind you I do see your point with BT, the thought has crossed my mind in the past but at the moment am in a waiting game, hoping that works out.

Without knowing your portfolio holdings i would be at a loss to recommend, we seem to have not asked that and just recommended shares which you may or may not have. Comments on your own suggestions are valid and I concur with DOD et al on those.

Good luck with whatever your choice is.

[Gengulphus]

Thinking of divesting my holding of BT in my HYP following it’s suspension of divis for the foreseeable & I’m also I’m not confident about its long term ability to recover its share price from it’s current slump. I’m currently sitting on a 48% capital loss and thought I could be better, rather than ‘locking in’ my losses, by purchasing some more of the other shares in my HYP with similar losses but with better dividend paying and overall prospects than BT.

I am currently sitting on losses of 50% for RDSB, 43% for IMB, 47% for HSBC & 27% for Aviva. Would any of these make a better home for my money than BT? Or are there any other candidates who’s share price has dropped lately but might be a better home for my dosh?

Sorry, but I can't start to answer this...

Why not? Because you haven't told me what else is in your HYP! Diversification is an important aspect of the comparative (*) safety of HYP dividend income, so it would for instance be silly for me to recommend any insurance company (such as Aviva) if your HYP is already overloaded with insurance companies, or any bank (such as HSBC) if your HYP is already overloaded with banks, or either of them if your HYP is already overloaded with the wider grouping of 'financials'.

As for what would help, ideally it's a list of shares with percentage weightings (by capital, not by income contribution - the latter is philosophically more in tune with a HYP approach, but far too likely to be misunderstood in these days of widespread dividend cuts). But just a list of the shares would be better than nothing, and a list of the shares with notes against any especially big or especially small holdings would go a long way towards the ideal.

By the way, you're by no means the only HYPer to have asked for purchase recommendations without saying what's already in their HYPs, and I know I don't always post a reply along these lines. Basically, life is too short... But occasionally I do, and this just happens to be one of those occasions - nothing personal, I just happen to have had the time and motivation this morning!

(*) Compared with other investment strategies in individual non-investment-company shares, that is. (By the way, this is NOT an invitation to discuss any of those strategies, nor any other types of strategy!)

Gengulphus

[CryptoPlankton]

I too am hanging on to my (now!) small holding of BT. I might possibly have ditched it a while back if I had my eye on the ball, but I allowed myself to get complacent with my HYP shares. I am not overly concerned and selling to buy something else at this stage wouldn't really make a worthwhile or necessary impact in the short-term.

This (month old) article might be of some interest:

https://www.ii.co.uk/analysis-commentar ... s-ii511724

[Dod101]

Why not? Because you haven't told me what else is in your HYP! Diversification is an important aspect of the comparative (*) safety of HYP dividend income, so it would for instance be silly for me to recommend any insurance company (such as Aviva) if your HYP is already overloaded with insurance companies, or any bank (such as HSBC) if your HYP is already overloaded with banks, or either of them if your HYP is already overloaded with the wider grouping of 'financials'

Which is which I said in my first post '.........if you do not hold or would be happy to top up......'

Best to keep things simple.

Dod

[Gengulphus]

Why not? Because you haven't told me what else is in your HYP! Diversification is an important aspect of the comparative (*) safety of HYP dividend income, so it would for instance be silly for me to recommend any insurance company (such as Aviva) if your HYP is already overloaded with insurance companies, or any bank (such as HSBC) if your HYP is already overloaded with banks, or either of them if your HYP is already overloaded with the wider grouping of 'financials'

Which is which I said in my first post '.........if you do not hold or would be happy to top up......'

Yes, you said that - but no, that isn't the same as what I said. It's possible that floyd3592 already holds a high weighting of insurance companies but does not hold Legal & General: if so, what you said would be a recommendation to buy Legal & General, but what I said indicates (correctly) that I would not recommend such a purchase.

Gengulphus

[floyd3592]

If someone had thought BT. was a great buy with a good divi record at Xp why on earth are they selling at 0.5Xp?

GS

It's quite simple. Shares in BT Group (LSE:BT) will not pay any more dividends for 2019–20. Dividends have been cut to zero for 2020–21. 'Why on earth' can they be considered a High Yield Share?...

[Clariman]

This is not even remotely HYP. The whole point of HYP is that you never sell
GS

Moderator Message:
Hi GS. This is not helpful. There is nothing in the new HYP Guidelines that you says you must "never sell". In fact, it explicitly states that shares can sometimes be sold. Let's have a bit of live and let live.

It is acknowledged that individual HYP investors may from time to time see the need to sell individual HYP stocks

Thanks
Clariman